Question 1

If Linda' annual income is $160,000 and she pays $35,000 in taxes, and Paul's annual income is $100,000 and he pays $25,000 in taxes, the tax system is

Accepted Answer

A) regressive. 
B) progressive. 
C) proportional. 
D) degressive. 
A) regressive. 
B) progressive. 
C) proportional. 
D) degressive.

Question 2

The system of grants from one level of government to another is an example of fiscal federalism.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is an example of a direct tax?

Accepted Answer

A) Sales tax 
B) Property tax 
C) Gasoline tax 
D) Income tax 
A) Sales tax 
B) Property tax 
C) Gasoline tax 
D) Income tax

Question 4

When we say most Americans are in the 15-percent tax bracket, we mean federal taxes are about 15 percent of the income of most Americans.

Accepted Answer

A) True 
 B)False

Question 5

Why do many economists rate the income tax high in efficiency and equity terms?

Accepted Answer

The income tax could potentially reduce

Question 6

Payments to Social Security recipients would decline if the retirement age were lowered.

Accepted Answer

A) True 
 B)False

Question 7

When the average tax rate rises as income rises, this is known as progressive taxation.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following best reflects the ability-to-pay philosophy of taxation?

Accepted Answer

A) An excise tax on coffee 
B) An excise tax on gasoline 
C) A progressive income tax 
D) A tax on residential property 
A) An excise tax on coffee 
B) An excise tax on gasoline 
C) A progressive income tax 
D) A tax on residential property

Question 9

Figure 18-3  
-In which panel of Figure 18-3 would an excise tax be borne entirely by the consumer?

Accepted Answer

A) 1 
B) 2 
C) 3 
D) 4 
A) 1 
B) 2 
C) 3 
D) 4

Question 10

The payroll tax represents

Accepted Answer

A) the largest source of revenue in the federal budget. 
B) the second largest source of revenue in the federal budget. 
C) the third largest source of revenue in the federal budget. 
D) the largest source of revenue in state government budgets. 
A) the largest source of revenue in the federal budget. 
B) the second largest source of revenue in the federal budget. 
C) the third largest source of revenue in the federal budget. 
D) the largest source of revenue in state government budgets.

Question 11

Fiscal federalism

Accepted Answer

A) is uncommon in the United States. 
B) involves grants between levels of government. 
C) relies on balanced budgets. 
D) is administered by the Federal Reserve. 
A) is uncommon in the United States. 
B) involves grants between levels of government. 
C) relies on balanced budgets. 
D) is administered by the Federal Reserve.

Question 12

Tax loopholes reduce the excess tax burden on individuals.

Accepted Answer

A) True 
 B)False

Question 13

The exemption of municipal bond interest income from federal personal income taxes

Accepted Answer

A) generally benefits the wealthy most. 
B) does not help municipal governments lower financing costs because it is offset by shifting increasing municipal bond rates. 
C) does not help municipal governments lower financing costs because it is offset by shifting falling municipal bond rates. 
D) is an indirect tax on the underlying municipal bonds that generate the interest income. 
A) generally benefits the wealthy most. 
B) does not help municipal governments lower financing costs because it is offset by shifting increasing municipal bond rates. 
C) does not help municipal governments lower financing costs because it is offset by shifting falling municipal bond rates. 
D) is an indirect tax on the underlying municipal bonds that generate the interest income.

Question 14

A tax has an excess burden whenever

Accepted Answer

A) people are unable to alter their behavior to avoid paying it. 
B) government seeks to raise it. 
C) it raises a great deal of revenue. 
D) it induces people to change their behavior. 
A) people are unable to alter their behavior to avoid paying it. 
B) government seeks to raise it. 
C) it raises a great deal of revenue. 
D) it induces people to change their behavior.

Question 15

If a tax is regressive, the average tax rate

Accepted Answer

A) remains the same as income rises. 
B) rises as income rises. 
C) falls as income rises. 
D) falls as income falls. 
A) remains the same as income rises. 
B) rises as income rises. 
C) falls as income rises. 
D) falls as income falls.

Question 16

If Harun's taxes are $20,000 when he earns $100,000 and $15,000 when he earns $80,000, then

Accepted Answer

A) Harun faces a progressive tax. 
B) Harun faces a regressive tax. 
C) Harun faces a proportional tax. 
D) Harun faces a falling marginal tax rates. 
A) Harun faces a progressive tax. 
B) Harun faces a regressive tax. 
C) Harun faces a proportional tax. 
D) Harun faces a falling marginal tax rates.

Question 17

The concept of equity pertains to the fairness of a tax.

Accepted Answer

A) True 
 B)False

Question 18

State governments' main source of revenue is

Accepted Answer

A) property taxes. 
B) income taxes. 
C) excise taxes. 
D) sales taxes. 
A) property taxes. 
B) income taxes. 
C) excise taxes. 
D) sales taxes.

Question 19

The ability of homeowners to deduct mortgage interest costs from their taxes makes the income tax more progressive.

Accepted Answer

A) True 
 B)False

Question 20

Some enterprising individuals produce and sell alcoholic beverages without collecting or paying legally required taxes.These "moonshiners" often have to hide their production facilities and hire fast driving delivery personnel to avoid various authorities.These moonshiners

Accepted Answer

A) are taking advantage of obvious loopholes in the tax rules. 
B) are making the alcohol taxes more regressive by altering who pays the taxes. 
C) are indicative of the tax's excess burden even if their actions may reduce excess burden relative to no moonshining. 
D) are able to avoid the tax burdens on the moonshined alcohol assuming they are not caught and fined by the authorities. 
A) are taking advantage of obvious loopholes in the tax rules. 
B) are making the alcohol taxes more regressive by altering who pays the taxes. 
C) are indicative of the tax's excess burden even if their actions may reduce excess burden relative to no moonshining. 
D) are able to avoid the tax burdens on the moonshined alcohol assuming they are not caught and fined by the authorities.

Exam 17: Taxation and Resource Allocation

If Linda' annual income is $160,000 and she pays $35,000 in taxes, and Paul's annual income is $100,000 and he pays $25,000 in taxes, the tax system is

The system of grants from one level of government to another is an example of fiscal federalism.

Which of the following is an example of a direct tax?

When we say most Americans are in the 15-percent tax bracket, we mean federal taxes are about 15 percent of the income of most Americans.

Why do many economists rate the income tax high in efficiency and equity terms?

Payments to Social Security recipients would decline if the retirement age were lowered.

When the average tax rate rises as income rises, this is known as progressive taxation.

Which of the following best reflects the ability-to-pay philosophy of taxation?

Figure 18-3 -In which panel of Figure 18-3 would an excise tax be borne entirely by the consumer?

The payroll tax represents

Fiscal federalism

Tax loopholes reduce the excess tax burden on individuals.

The exemption of municipal bond interest income from federal personal income taxes

A tax has an excess burden whenever

If a tax is regressive, the average tax rate

If Harun's taxes are $20,000 when he earns $100,000 and $15,000 when he earns $80,000, then

The concept of equity pertains to the fairness of a tax.

State governments' main source of revenue is

The ability of homeowners to deduct mortgage interest costs from their taxes makes the income tax more progressive.

Some enterprising individuals produce and sell alcoholic beverages without collecting or paying legally required taxes.These "moonshiners" often have to hide their production facilities and hire fast driving delivery personnel to avoid various authorities.These moonshiners

What Is Economics

The Economony: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: an Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: the Importance of Marginal Analysis

The Financial Markets and the Economy: the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

The Case for Free Markets: the Price System

Monopoly

Between Competition and Monopoly

Limiting Market Power: Antitrust and Regulation

The Shortcomings of Free Markets

The Economics of the Environment, and Natural Resources

Pricing the Factors of Production

Labor and Entrepreneurship: the Human Inputs

Poverty, Inequality, and Discrimination

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation

Bringing in the Supply Side: Unemployment and Inflation

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

The Financial Crisis and the Great Recession

The Debate Over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off Between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder

Exchange Rates and the Macroeconomy

Contemporary Issues in the Useconomy

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